European Stocks Advance for Fifth Week on Stimulus Bets

July 7 (Bloomberg) -- European stocks rose for a fifth week
as investors bet central banks would add to measures to
stimulate economic growth, with the Stoxx Europe 600 Index
paring some gains on concern that risks to a recovery remain.

The Stoxx 600 climbed 1.3 percent to 254.4 this week, for
the longest stretch of gains since January. The benchmark
measure has rallied 8.8 percent from this year’s low on June 4
after policy makers, meeting in Brussels last month, eased
repayment rules for Spanish banks and relaxed conditions for
possible aid to Italy.

“Monetary easing by the U.K., China’s anticipated rate cut
and the lingering good sentiment after the EU summit supported
the markets,” said Manish Singh, the London-based head of
investment at Crossbridge Capital, which has more than $2
billion under management. “There’s an accepted view that bad
news is also good news. So bad economic data made some investors
think there’s help on the way.”

Central Banks

The European Central Bank cut its main refinancing rate to
0.75 percent from 1 percent, as predicted by 49 of 64 economists
in a Bloomberg News survey, and cut its deposit rate to zero
from 0.25 percent.

Speaking after the decision was announced, ECB President
Mario Draghi said some “downside risks to the euro-area
economic outlook have materialized” and “economic growth in
the euro area continues to remain weak.”

China cut benchmark interest rates for the second time in a
month and allowed banks to offer bigger discounts on their
lending costs. The one-year lending rate fell by 31 basis points
and the one-year deposit rate dropped by 25 basis points.

The Bank of England’s Monetary Policy Committee raised its
asset-purchase target by 50 billion pounds ($78 billion) to 375
billion pounds. Thirty out of 41 economists had forecast the
move in a Bloomberg survey.

U.S. Payrolls

In the U.S., a Labor Department report showed that
employers hired fewer workers that forecast in June. Payrolls
rose 80,000 last month after a 77,000 increase in May. That
missed the median estimate in a Bloomberg News survey that
called for a gain of 100,000. Private hiring added 84,000 in
June, the weakest in 10 months, while the jobless rate held at
8.2 percent.

In China, the government’s Purchasing Managers’ Index fell
to 50.2 in June from 50.4 in May, the National Bureau of
Statistics and China Federation of Logistics and Purchasing
reported on July 1. A separate PMI, compiled by HSBC Holdings
Plc and Market Economics, posted a final reading of 48.2 in June
compared with 48.4 in May, according to figures released the
next day.

“There’s still some uncertainty in the air,” Singh said.
“Unless growth measures are put in place or growth picks up,
the struggles of peripheral Europe will keep resurfacing as band
aids gradually come off.”

European Equities

Morgan Stanley’s European Equity Strategy team including
Graham Secker, Ronan Carr and Matthew German raised the region’s
equities to neutral from underweight on July 2, saying the
decisions at the European Union summit had lowered risk.

Arkema, which sold an unprofitable vinyls business, jumped
15 percent as FT Alphaville reported the company received
takeover approaches valuing it at 5.5 billion euros ($6.8
billion) or more. The company has drawn interest from DuPont Co.
and BASF SE, FT Alphaville reported, citing “usually
knowledgeable sources.”

GKN rallied 15 percent after agreeing to buy Volvo’s
aircraft-engine unit for 633 million pounds. GKN said it will
raise 140 million pounds in a share sale to help pay for the
purchase.

Chr. Hansen Holding A/S surged 15 percent after the Danish
maker of natural food colors and cheese cultures reported
earnings that exceeded estimates. Third-quarter net income was
34.6 million euros, beating the average estimate of 33.1 million
euros in a Bloomberg News survey of eight analysts. The company
also predicted higher revenue growth for the fiscal year ending
Aug. 31.

Volkswagen, Porsche

Volkswagen AG, Europe’s largest carmaker, climbed 5.5
percent after agreeing to buy the controlling stake in Porsche’s
automotive business for 4.46 billion euros. The transaction
enables VW to fully incorporate Porsche’s automotive business
into its stable of brands. Porsche added 2.1 percent.

Man Group Plc declined 16 percent as JPMorgan & Chase Co.
cut its price estimate for the world’s largest publicly traded
hedge-fund manager by 55 percent to 45 pence, citing a
“disappointing” investment performance by the Man AHL
Diversified fund in the second quarter.

Separately, Credit Suisse Group AG cut the stock to neutral
from outperform and Societe Generale SA downgraded its
recommendation for the stock to hold from buy.

Rhoen Klinikum AG slumped 12 percent as Fresenius SE said
its tender offer failed to win enough shareholder support
because rival Asklepios Kliniken GmbH took a 5 percent stake in
Rhoen. About 84 percent of Rhoen Klinikum shares were tendered
in the offer, Fresenius said after the market closed on June 29.
The 22.50 euro-a-share bid was contingent on garnering at least
90 percent of the stock.